The Company pays for the use of its office, laboratory and manufacturing facility in San Jose, California as part of the RMS-ICL Service Agreement. In April 2022, RMS assigned the RMS-ICL Service Agreement to Rani LLC. The RMS-ICL Service Agreement has a twelve-month term and will automatically renew for successive twelve-month periods unless Rani LLC or ICL terminate occupancy under the RMS-ICL Service Agreement upon six months’ notice. The Company determined it to be reasonably certain that it would exercise its renewal option for a successive twelve-month period and has considered it in the determination of the right-of-use assets and lease liabilities associated with the RMS-ICL Service Agreement as of December 31, 2022.

Under the Rani LLC-ICL Service Agreement amended in March 2022, Rani LLC has a right to occupy certain facilities leased by ICL in Milpitas, California and San Antonio, Texas for general office, research and development, and light manufacturing. The Rani LLC-ICL Service Agreement has a twelve-month term and will automatically renew for a successive twelve-month periods unless terminated; except that the Occupancy Services in Milpitas, California have a term until February 2024, following an extension granted in July 2022, with the potential for one additional annual renewal, subject to approval by the landlord upon a nine months’ notice of renewal prior to the end of the lease term, and the Occupancy Services in San Antonio, Texas continue until either party gives six months’ notice of termination. The Company accounted for the lease extension as a lease modification that did not result in a separate contract and recognized the right-of-use asset and lease liabilities associated with the Rani LLC-ICL Service Agreement in the consolidated balance sheet as of December 31, 2022. As of December 31, 2022, the second renewal option for the facility in Milpitas, California was not deemed reasonably certain to be exercised.

The Company's leases are accounted for as operating leases and require certain fixed payments of real estate taxes and insurance in addition to future minimum lease payments, and certain variable payments of common area maintenance costs and building utilities. Variable lease payments are expensed in the period in which the obligation for those payments is incurred. These variable lease costs are payments that vary in amount beyond the commencement date, for reasons other than passage of time. Total operating lease expense incurred with ICL was $1.5 million and $0.8 million for the years ended December 31, 2022 and 2021, respectively. Variable lease payments are excluded in the total operating lease expense and immaterial for the periods presented.

Supplemental information on the Company’s consolidated balance sheet and statements of cash flows as of December 31, 2022 related to leases was as follows (in thousands):


	December 31,
	2022
Balance sheet
Operating lease right-of-use assets	$	1,065

Operating lease liability, current portion	$	1,006
Operating lease liability, less current portion		59
Total operating lease liability	$	1,065


	December 31,
	2022
Cash flows
Cash paid for amounts included in lease liabilities:
Operating cash flows used for operating leases	$	832


	December 31,
	2022
Weighted-average remaining lease term	1.1 years
Weighted-average discount rate		7.0	%

As of December 31, 2022, minimum annual rental payments under the Company’s operating lease agreements are as follows (in thousands):


Year ending December 31,
2023	$	1,044
2024		59
Total undiscounted future minimum lease payments	$	1,103
Less: Imputed interest		(38	)
Total operating lease liability	$	1,065
Less: Operating lease liability, current portion		1,006
Operating lease liability, less current portion	$	59

Operating leases in the table above exclude future minimum lease payments for Occupancy Services in San Antonio, Texas under the Rani LLC-ICL Service Agreement. Future minimum lease payments for Occupancy Services in San Antonio for fiscal year 2023 total $0.1 million.